How Ritesh Agarwal's OYO scaled the great wall of China

OYO has operations also in Malaysia and Nepal and plans to expand to Indonesia and the UK.

BENGALURU: When hotel chain OYO decided to expand to China in December, the go-to market strategy was clear in chief executive Ritesh Agarwal’s mind. He didn’t want to think like an Indian company launching operations in another country. Instead, “we wanted to think like a company in China that was trying to emulate OYO.” This, Agarwal believes, helped OYO take a more local approach and avoid some of the mistakes a foreign company would commit.

“Most companies… usually go to China as if they are launching a foreign company in China,” Agarwal told ET. “From our perspective, the only (hotel) company that can do a good job (in China) would be one that emulates OYO.”

So for every decision that the OYO team has to make in China, they ask, “What would the company that was copying OYO do?”, and plan accordingly.

“Most foreign companies look at recruiting bilingual management teams in a different country. We didn’t make that a criteria because a local company wouldn’t have that constraint and if we would have that constraint, we would narrow our talent pool,” said Agarwal.

Now, almost 10 months since it launched in China, OYO operates over 50,000 rooms across 50 cities in the country. Agarwal said the hotels that have come under the OYO brand in China have seen occupancy rates grow from 20-25% to 60-65% in a couple of months.

“We believe that if we continue doing this, we will be able to generate a significant amount of OYO’s global revenue from China,” Agarwal said.

OYO has operations also in Malaysia and Nepal and plans to expand to Indonesia and the UK.

China has its Airbnb equivalents such as Tujia, which targets a similar customer bracket looking at alternatives to expensive hotels. Industry experts estimate the budget hotel market opportunity in China to be 5-10 times bigger than that of India’s in terms of the number of hotels and travellers.

In India, where OYO says it is close to reaching profitability, the company has an estimated 100,000 exclusive rooms under its management, with a presence in 230 cities. Between January and June, OYO hotels in India clocked 17 million booked rooms nights.

When it comes to cultural differences between India and China, Agarwal says there aren’t many. “In OYO India, when employees sign off on their targets, we have the OYO tree where employees come and tie a red thread and the target… and a year later, they come and pull it out,” said Agarwal. “When we showed this tradition to our Chinese team, they said this is what happens in China as well.”

That said, certain differences exist in terms of customer expectations.

Agarwal said that while customers in India expect full-blown service even at economy hotels, Chinese customers’ expectations tilt more towards having better infrastructure at economy hotels. OYO was able to gather these insights by going into the country with zero preconceived notions and starting with a clean slate, he said.

Agarwal was talking on the sidelines of Extreme Entrepreneurs 2018, a training series for startups organised by Lightspeed India Partners, an investor in OYO.

Other investors include Japan’s SoftBank, which is the largest shareholder in OYO, holding around 45% stake. Sequoia Capital India holds 11% stake and Agarwal, 11-12%.